Tag: Carried Interest

Congress Delivers Historic Tax and Budget Package to Trump’s Desk for July 4th Signing

Posted on by abigail_grenadier

After months of high-stakes negotiations, Congress this week passed the sweeping One Big Beautiful Bill Act, a comprehensive reconciliation package that overhauls tax policy, restructures federal spending, and advances numerous Real Estate Roundtable (RER) priorities as it heads to President Trump’s desk for signature. (Roll Call, July 3)

State of Play

  • The House passed the final version of the One Big Beautiful Bill Act this afternoon, following a narrow vote of 218–214, capping off weeks of negotiations and delivering a legislative victory to Republican leaders ahead of the July 4 deadline. In the end, two Republicans—Reps. Thomas Massie (R-KY) and Brian Fitzpatrick (R-PA)—joined all Democrats in opposing the bill. (The Hill, July 3)
  • “With one big, beautiful bill, we are gonna make this country stronger, safer, and more prosperous than ever before, and every American is going to benefit from that,” said House Speaker Mike Johnson (R-LA). “Today we are laying a key cornerstone of America’s new golden age.” (Politico, July 3)
  • The Senate passed the sweeping budget bill in a 51-50 vote on Tuesday, after almost 24 hours of debate, amendments, and a “vote-a-rama” that ended with Vice President JD Vance casting the tiebreaking vote in favor of passage. Three GOP senators—Rand Paul (R-KY), Thom Tillis (R-NC), and Susan Collins (R-ME) voted no. (Axios, July 2)
  • In an interview after the bill’s Senate passage, Senate Majority Leader John Thune (R-SD) acknowledged that the decision to make the measure’s business tax cuts permanent impacted its savings and overall strategy. “We really believed that permanence was the key to economic growth because it creates certainty,” he said. “All the models that we saw showed that you got more growth with permanence.” (PoliticoPro, July 1)

Roundtable Advocacy

  • The final legislation advances a broad array of policies that support capital formation, real estate investment, and housing development, while repealing harmful proposals like Section 899 and preserving longstanding tax rules vital to CRE.
  • “This legislation represents a meaningful step toward strengthening communities, expanding housing opportunities, and supporting long-term economic growth,” said Jeffrey DeBoer, President and CEO of RER. “By advancing policies that encourage investment and preserve small business tax parity, Congress is helping to revitalize neighborhoods, create jobs, and ensure all Americans benefit from a stronger built environment.
  • DeBoer added, “We are, of course, disappointed that the overall bill is predicted to increase the deficit and national long-term debt. However, we hope that the pro-growth aspects of the bill will narrow both by significantly growing the economy and providing revenues greater than those now projected.  Likewise, we are concerned with predictions by some regarding the impact of spending cuts on research and needed health care for Americans.”
  • RER’s advocacy efforts were particularly successful in eliminating several provisions that would have severely impacted CRE, including Section 899, known as the “revenge tax,” and harmful limitations on state and local tax deductions for pass-through businesses.
  • Speaking to Bisnow regarding the impact of the tax provisions on real estate, Ryan McCormick, RER’s SVP and Counsel, said, “From the bill’s investment in housing and low-income communities to its fair treatment of entrepreneurial and pass-through businesses, the legislation strikes the right balance … it should spur job-creating capital investments in commercial properties across the nation.” (BisNow, July 1)

Tax Policy

  • The final legislation includes several tax provisions that will provide significant benefits to commercial real estate and support long-term economic growth:
  • Permanent Business Tax Cuts: The bill makes permanent several business tax deductions from the 2017 Tax Cuts and Jobs Act (TCJA), including the Section 199A deduction for pass-through businesses and interest deductibility rules under Section 163(j).
  • Section 899: Late last week, lawmakers removed the Section 899 provision known as the “revenge tax” from the bill after the Treasury Department secured an international tax agreement with G7 countries. RER strongly advocated for changes to the measure, warning that the tax would have deterred foreign investment in U.S. commercial real estate and weakened capital formation.  (Roundtable Weekly, June 27) (BisNow, July 1) (Commercial Property Executive, July 1)
  • Opportunity Zones: OZs are now a permanent feature of the tax code, though deferral periods for eligible gains are shortened through the end of 2026—a technical issue that RER will continue to address in discussions with Congress and Treasury.
  • Low-Income Housing Tax Credit (LIHTC): The bill preserves and enhances the LIHTC program, supporting the construction of affordable housing nationwide.
  • Bonus depreciation & expensing: Full expensing and 100% bonus depreciation for qualifying property are restored and made permanent, providing significant cash flow benefits for property owners undertaking capital improvements.
  • SALT workarounds preserved: The final bill drops proposed changes to state and local tax deductibility on pass-through business income, preserving current law that allows deductibility through state pass-through entity tax regimes.
  • Condominium construction tax accounting: The legislation includes provisions the RER has advocated for since 2015, allowing condo developers to use the completed contract method of accounting, aligning tax liability with actual receipts.
  • Excess business losses: The revised Senate bill avoids a controversial proposal from earlier drafts that would have permanently siloed active pass-through business losses, instead opting to extend current law under Section 461(l) without restricting taxpayers from using those losses against wages and investment income. This approach preserves flexibility for entrepreneurs, start-ups, and two-earner households and avoids undermining the principle of measuring true net income.

Energy Tax Credits

Sustainable Renewable Energy Concept With Wind Turbines, Solar Panels And City Buildings Background.
  • For months, clean energy tax incentives enacted under the Inflation Reduction Act (IRA) have been a point of contention in both the House and Senate, with several Republican lawmakers urging leadership to take a more targeted approach to scaling back the IRA’s provisions—while maintaining incentives that support both traditional and renewable energy sectors. (RW, April 25) (CBS News, July 1)
  • Ultimately, the final legislation significantly scales back the IRA’s clean energy tax incentives by accelerating the phase-out of wind and solar credits, while dropping a controversial excise tax on projects using foreign components and preserving eligibility for already planned or approved developments that begin construction before mid-2026. (PoliticoPro, July 1) (Bloomberg, July 1)
  • The Section 48E Investment Tax Credit (ITC) for wind and solar projects remains in the tax code, but projects that begin construction 12 months after the bill’s enactment must be placed in service by the end of 2027.
  • The Section 179D deduction for energy-efficient commercial building construction and retrofits is now limited to projects that begin construction by June 30, 2026.
  • Similarly, the 45L tax credit for energy-efficient new residential construction expires for homes “acquired” after June 30, 2026.
  • Importantly, ENERGY STAR’s current budget for FY2025 was not affected by any of the funding rescissions in the final bill.
  • At this week’s BOMA International Conference, RER’s SVP and Counsel Duane Desiderio joined John Boling (VP, Advocacy & Building Codes, BOMA International) for a panel discussion on ENERGY STAR Portfolio Manager, highlighting the program’s legal foundation, bipartisan economic appeal, and importance to real estate stakeholders. (Commercial Property Executive, July 2)
  • RER will continue engaging with lawmakers through the annual appropriations process to ensure that FY2026 federal funding bills (for spending starting October 1) support ENERGY STAR. (Commercial Property Executive, July 2)

What’s Next

  • With the One Big Beautiful Bill Act heading to the president’s desk, attention now turns to the appropriations process and additional reconciliation opportunities.
  • Speaker Mike Johnson has expressed interest in pursuing additional budget reconciliation efforts, a process that Congress can undertake at the end of the fiscal year.
  • In an interview on Fox News Tuesday, Johnson said, “This is just a step in a sequence of events. We’re intending to do more reconciliation work. The plan is to do one in the fall for FY26 budget year and we can also squeeze in a third one for FY27 before this Congress is up.” (Politico, July 2) (Punchbowl News, July 2)

RER will continue to provide in-depth analysis in the coming days and weeks on the reconciliation bill’s implications for commercial real estate, including technical implementation, market impacts, and policy recommendations.

“One Big Beautiful Bill” Moves Through to the Senate as House Republicans Unite on Trump Tax Plan

Posted on by abigail_grenadier

House Speaker Mike Johnson (R-LA) met his self-imposed Memorial Day deadline as dissenting factions within the caucus reached an agreement on a series of last-minute changes, culminating in a razor-thin vote (215-214) on the One Big Beautiful Bill Act early Thursday morning. The budget reconciliation measure—which has wide implications for CRE—now goes to the Senate, where a similar tug of war could play out. (Ways & Means Press Release, May 22)

State of Play

  • The House Budget Committee voted late Sunday night to advance President Donald Trump’s One Big Beautiful Bill Act after several GOP hard-liners on the Committee blocked the measure from moving forward last Friday. (ABC News, May 19)
  • President Trump traveled to Capitol Hill Tuesday morning to deliver a message to House Republicans impeding the massive bill, a critical part of his domestic agenda: stop fighting and get it done as soon as possible. (NBC News, May 20)
  • The chamber took action, clearing the sprawling package in an early-morning vote Thursday after days of marathon meetings, intense negotiations that spanned both ends of Pennsylvania Avenue, and a series of swift changes to the bill, which were crucial in coalescing Republicans around the measure. (The Hill, May 22)
  • House Ways and Means Chair Jason Smith (R-MO) said that he’s been working “hand in glove” with Majority Leader John Thune (R-SD) and Senate Finance Committee Chair Mike Crapo (R-ID) on the tax package and had crafted it intentionally so it could survive the Senate’s rules. “I think 90 to 95 percent of the bill is going to be pretty much very similar,” he said previously. (Bloomberg, May 22)

Implications for CRE

  • The legislation includes an extension of the 2017 tax cuts, while maintaining the full deductibility of state and local business property tax deductions (also known as “Business SALT”) and preserving the current treatment of carried interest, two key priorities for The Roundtable in the current tax negotiations.
  • Additionally, the pass-through deduction under Section 199A would increase from 20 percent to 23 percent for qualifying income, including REIT dividends and the real estate operating income of partnerships and other pass-through entities. A late addition to the bill will allow REITs greater flexibility in their use of taxable REIT subsidiaries. (The Hill, May 21)
  • The bill extends the Opportunity Zone (OZ) tax incentives through 2033, with several updated eligibility criteria and new benefits for rural areas. This legislation also calls for a new round of OZ designations by state governors. (Mortgage Point, May 22)
  • Other positive developments include an expansion of the low-income housing tax credit and the reinstatement of 100 percent expensing for qualifying leasehold and nonresidential property improvements.
  • Now, the Senate will debate and craft its version of the bill, which it aims to pass by July 4. (The Hill, May 21; CNBC, May 22)

The Roundtable’s Position

  • RER expressed support for the House’s budget reconciliation measure. The extension of TCJA policies, preservation of property tax deductibility, continued capital gains treatment for carried interest, increased investment in affordable housing, and enhanced pass-through deduction are all positive developments. 
  • “Taken as a whole, the tax proposals in the Chairman’s amendment will spur needed investment in our nation’s housing supply, strengthen urban and rural communities, and grow the broader economy to the benefit of all Americans,” said RER President and CEO Jeff DeBoer in a recent statement following the House Ways and Means Committee’s bill markup last week.

What’s Next       

  • The action on the tax and fiscal legislation now shifts to the U.S Senate where Republicans are operating under similar tight margins.
  • Senate Republican leaders have not yet decided whether they will mark up the reconciliation bill in the various committees of jurisdiction. Finance Chairman Crapo could bring a substitute amendment straight to the Senate floor sometime in June.

RER will work to ensure that these hard-fought victories are protected in any final tax package.

Tax Talks Intensify as House Republicans Race Toward Memorial Day Deadline

Posted on by abigail_grenadier

House Republicans wrapped up a pivotal week in their drive to finalize a sprawling reconciliation package aligned with President Donald Trump’s domestic agenda. But deep internal divides over tax priorities, energy incentives, and offsets­—coupled with new demands from the President—have added a new layer of complexity.

Busy Week on Capitol Hill

  • House Republicans faced a flurry of high-stakes meetings this week as they worked to finalize a massive reconciliation package before the self-imposed Memorial Day deadline. (Politico, May 5)
  • Speaker Mike Johnson privately told Republicans on Thursday that they would only be able to pay for $4 trillion in tax cuts, versus the $4.5 trillion they had targeted to enact the president’s sprawling tax demands. (PoliticoPro, May 8)
  • The House Ways and Means Committee tentatively plans to begin marking up the tax portion of the reconciliation package next Tuesday. (Tax Notes, May 9)
  • A high-level “Big Six” meeting convened on Wednesday, led by Secretary Scott Bessent, to align House, Senate, and White House tax priorities.
  • Speaking this morning, Senate Majority Leader John Thune noted another new tax proposal now on the table. “The President has proposed expensing for factories, for domestic manufacturing, which would be very stimulative.” (CNBC, May 9)
  • Meanwhile, during a private call with Speaker Johnson on Wednesday, President Trump reportedly urged the Speaker to include a new 39.6% tax rate for high-income earners and reform of carried interest tax rules—further complicating an already difficult path forward. (NBC News, May 8)

  • However, President Trump said Friday that GOP lawmakers should “probably not” raise taxes on the wealthy, though he acknowledged he would accept such a measure, as Republicans continue to negotiate the final details of the bill. (The Hill, May 9) (NYT, May 9)
  • House Ways and Means Chair Jason Smith (R-MO) is scheduled to meet with the President today to discuss the tax package. (Politico, May 8)

Carried Interest

  • Among his new requests to Speaker Johnson this week, President Trump revived his long-standing call to eliminate the carried interest tax “loop hole.” (Politico, May 9)
  • Since carried interest and its tax treatment first emerged as a controversial political issue in 2007, RER has consistently opposed legislative proposals to tax all carried interest at ordinary income rates. 
  • Current tax rules recognize that risk-taking can take many forms other than just invested cash. The rules allow entrepreneurial risk-takers to earn income on appreciated assets at rates that align with outside investors and limited partners.
  • Senate Leader Thune defended the current treatment of carried interest this morning on CNBC’S Squawk Box, “I’m not a fan of taxing carried interest … these are the people out there investing and creating jobs.” (CNBC, May 9)

Business SALT

  • A key priority of The Roundtable (RER) and the real estate industry is preserving the full deductibility of business-related property taxes. The deductibility of business-related state and local income and property taxes emerged as a key issue early in the tax debate as lawmakers looked for ways to pay for new tax provisions.
  • A cap on the deductibility of property taxes paid by U.S. businesses could have devastating consequences for commercial real estate owners, developers, and investors nationwide.
  • State and local property taxes are an ordinary and necessary business expense for commercial real estate owners.  On average, property taxes represent 40% of the operating costs of U.S. commercial real estate, a greater expense than utilities, maintenance, and insurance costs combined.  (RW, April 11) 

Potential Challenges Ahead

  • The week saw intense negotiations behind closed doors, with unresolved disagreements over SALT, clean energy tax credits, and offsets threatening to delay progress.
  • SALT: Negotiations around the state and local tax (SALT) deduction cap remained deadlocked despite numerous meetings over the past week. (The Hill, May 8)
  • The Energy and Commerce Committee faces internal GOP friction over Medicaid reductions, balancing fiscal hawks demanding significant cuts against moderates worried about political fallout. (Politico, May 1)
  • In response to the new $4 trillion budget in tax cuts,  Rep. Ron Estes (R-KS), said Wednesday that he expects a number of tax provisions to be temporary, with some extended for four, six or eight years. (PoliticoPro, May 8)
  • Bessent and Senate Majority Leader Thune, have said they are targeting July 4 to pass President Trump’s “big beautiful bill.”

IRA & Energy Tax Credits

  • Republicans on the House Ways and Means Committee are still struggling to find consensus on repealing clean energy tax credits from the Inflation Reduction Act (IRA). (PoliticoPro, May 7)
  • While some lawmakers push to repeal IRA subsidies to free up revenue, others— including a group of moderate Republicans led by Rep. Mariannette Miller-Meeks (R-IA) urged Chair Smith this week to preserve technology-neutral electricity tax credits. The letter warned that repeal could lead to a 10% rise in electricity costs by 2026. (PoliticoPro, May 8)

Fed and Trade Developments Add Pressure

  • Adding to the week’s complexity, the Federal Reserve held interest rates steady at 4.25%–4.5% for a third consecutive meeting, citing heightened risks from tariffs and overall economic uncertainty. Fed Chair Jerome Powell signaled no immediate plans for rate cuts, emphasizing caution amid market volatility. (CNBC, May 7)
  • On the trade front, the Trump administration unveiled a new U.S. and U.K. trade agreement, signaling a temporary pause in tariff escalation. (Axios, May 9)

Roundtable on the Road

  • This week, Roundtable on the Road was in Los Angeles, CA where RER Chair Kathleen McCarthy (Global Co-Head of Real Estate, Blackstone) and RER  President and CEO Jeffrey DeBoer gathered local RER members and friends for a timely discussion on Washington’s policy outlook. The conversation focused on reconciliation legislation, interest rates, and market conditions.

What’s Next

With key markups expected next week, Republican leaders face significant hurdles in reaching a consensus on a final package that preserves tax provisions, satisfies fiscal hawks, and delivers wins on energy and trade all before Memorial Day.

GOP Races to Shape Reconciliation Bill

Posted on by abigail_grenadier

The House returned this week from recess to begin critical markups, racing against Speaker Mike Johnson’s Memorial Day goal. With just over three weeks until the Memorial Day target for President Donald Trump’s ambitious reconciliation bill, GOP lawmakers are navigating contentious policy debates on tax, Medicaid, energy incentives, and spending cuts.  (Politico, May 1)

State of Play

  • On Monday, Treasury Secretary Scott Bessent held another “Big Six” meeting with Speaker Mike Johnson (R-LA), Senate Majority Leader John Thune (R-SD), Senate Finance Chair Mike Crapo (R-ID), House Ways and Means Chair Jason Smith (R-MO), and National Economic Council Director Kevin Hassett to discuss the GOP’s tax provisions in the bill.
  • Although Speaker Johnson is adamant about his Memorial Day goal, Secretary Bessent indicated July 4 might be the more practical timeline.
  • After a White House meeting between President Trump, Speaker Johnson, House Majority Leader Steve Scalise (R-LA) and key committee chairs, the GOP leadership decided to delay markups next week in the House Energy and Commerce, Ways and Means and Agriculture committees. (Punchbowl News, May 2)
  • The House Financial Services Committee voted along party lines Wednesday to approve its portion of the reconciliation package, with Chair French Hill (R-AR) expecting savings to surpass the $1 billion in cuts mandated by the congressional budget resolution.

Tax Policy

  • Business SALT: The Roundtable (RER) is still focusing heavily on preserving the full deductibility of business-related property taxes, as lawmakers look for ways to pay for new tax provisions.
  • Through meetings, outreach, and aggressive advocacy efforts, RER and the real estate industry continue to urge lawmakers to reject a revenue proposal to limit the deductibility of state and local business-related property taxes as part of the tax bill.  The proposal could have a devastating impact on property values, rents, the health of the financial system, local communities, and consumer prices.
  • A cap on the deductibility of property taxes paid by U.S. businesses could have devastating consequences for commercial real estate owners, developers, and investors nationwide, reversing the benefits of the 2017 Tax Cuts and Jobs Act (TCJA) and raising effective tax rates on real estate to 1970s-era levels near 50%.  (RW, April 11) 
  • SALT: House Republicans left a high-stakes meeting with Speaker Mike Johnson on Wednesday without resolving their long-running internal dispute over the $10,000 SALT deduction cap.
  • Bonus Depreciation: President Trump said on Wednesday that Republicans are going to restore bonus deprecation for only four years. “Our big, beautiful bill, we may name it that actually, will include 100 percent expensing retroactive to January 20,” And we’re gonna make that expensing for a four-year-period at a full 100 percent.” (PoliticoPro, April 30)
  • The TCJA allowed businesses to fully deduct the costs of equipment and machinery, but bonus depreciation began phasing out in 2023, decreasing 20 percent annually and fully expiring at the end of 2025.

Carried Interest

  • The House Ways and Means Committee has privately indicated it’s not inclined to close the so-called carried interest loophole in the GOP’s sweeping tax package, though conversations are still ongoing. (PoliticoPro, April 29)
  • When asked about the proposal at a press conference, Speaker Johnson said that he didn’t want to get out front of the Ways and Means Committee but that “we’ve heard from interest groups around the country, and we want to do right by them.” (PoliticoPro, April 29)
  • Rep. Hill told Politico’s Morning Money last week that the policy “is a major source of economic growth, jobs, that impacts every community in the country — it’s not a loophole.” (Politico, May 1)
  • Since carried interest and its tax treatment first emerged as a controversial political issue in 2007, RER has consistently opposed legislative proposals to tax all carried interest at ordinary income rates.
  • RER’s Ryan McCormick told Bloomberg this week that taxing real estate investors’ “sweat equity” at higher income rates would hit projects in low-income and high-risk areas hardest. He added that, small real estate entrepreneurs take on significant risk when developing low-income areas, and these investors face similar risks as long-term equity holders and should be taxed at the 20 percent capital gains rate—a point he said has resonated with lawmakers. (Bloomberg, April 29)

IRA Energy Tax Credits

  • As the House Ways and Means Committee, prepares to markup its portion of the reconciliation bill in the coming weeks, House Ways and Means Chair Jason Smith (R-MO) has said the fate of the Inflation Reduction Act (IRA) is one of a few sticking points that the committee still has to figure out. (PoliticoPro, May 1)
  • Internal party divisions persist, highlighted by recent opposing letters from GOP lawmakers. Yesterday, Chair Smith received two letters from opposing House Republicans arguing their cases for full repeal of all energy tax credits under the IRA and preservation of the law.
  • The coalition of 26 House Republicans is urging GOP leaders to preserve electricity tax credits and protect the IRA’s transferability provision, which allows developers to finance clean energy projects by selling their tax credits. (PoliticoPro, May 2)
  • “Nothing is decided on the IRA,” said Rep. Vern Buchanan (R-FL), the number two Republican on Ways and Means. “The chips are on the table and a lot of that is going to happen next week.” (PoliticoPro, May 2)
  • In recent weeks, several Senate and House Republicans have written to leadership expressing their support for maintaining energy incentives that benefit both traditional and renewable energy sectors, and urging a more selective approach to scaling back the IRA’s tax provisions. (RW, April 25)

Challenges Ahead

  • The Energy and Commerce Committee faces internal GOP friction over Medicaid reductions, balancing fiscal hawks demanding significant cuts against moderates worried about political fallout. (Politico, May 1)
  • Majority Leader Thune (R-SD) highlighted the looming debt ceiling as a “hard deadline,” adding pressure to lawmakers juggling complex fiscal decisions.
  • Upcoming Treasury forecasts on the debt ceiling “X-date” could further adjust legislative schedules, as lawmakers await crucial financial projections.
  • Both House and Senate Republicans want to raise the debt limit in a budget reconciliation measure, something that President Trump has called for as well. (PoliticoPro, April 29)

White House Releases Budget

  • The White House on Friday released President Trump’s fiscal year 2026 budget request, outlining $163 billion in proposed reductions to federal spending that would start on October 1. (WSJ, May 2)
  • While presidential budgets outline an administration’s policy priorities, the figures rarely reflect the final appropriations determined by Congress. (Axios, May 2)
  • The FY2026 budget is expected to build on cuts already implemented by President Trump and adviser Elon Musk’s Department of Government Efficiency—most notably, reductions in the federal workforce. (AP News, May 2) The Trump proposal is already running into early resistance on Capitol Hill, including from Republicans. (Politico, May 2)
  • As reconciliation efforts progress, balancing the administration’s budgetary goals with legislative feasibility will be a challenge.

RER will continue to monitor developments closely as Congress advances a package that could have far-reaching implications for commercial real estate, business taxation, and economic growth.

What’s Ahead: Reconciliation Talks on Capitol Hill

Posted on by abigail_grenadier

Congress will return to Washington next week with an ambitious agenda—kicking off markups for a sweeping reconciliation package that would enact the President’s legislative agenda and could shape the fiscal and tax landscape for years to come. (CBS, April 24)

Markup Schedule

  • The Judiciary, Homeland Security, and Armed Services Committees are expected to lead the process starting the week of April 28. These panels have jurisdiction over spending on border security and defense and are tasked with allocating $110 billion, $90 billion, and $100 billion respectively under the House budget resolution. (Politico, April 17)
  • The Energy and Commerce Committee is targeting May 7 for its markup. The committee is required to find $880 billion in savings, which may involve changes to Medicaid, electric vehicle mandates, and other policy areas. (Punchbowl News, April 23)
  • The Financial Services Committee is set to vote on April 30 on its share of the reconciliation package, which must include a minimum of $1 billion in cuts over 10 years. (PoliticoPro, April 23)
  • Speaker Mike Johnson (R-LA) and Senate Majority Leader John Thune (R-SD) have expressed a shared goal of advancing the reconciliation package by Memorial Day.
  • “We are pushing it very aggressively on schedule, as you said, to get it done by Memorial Day,” Johnson said this week, citing the need to tame stock market instability.
  • Johnson also said he and House Majority Leader Steve Scalise (R-LA) had a conference call with the 11 House GOP committee chairs on Wednesday to discuss the next steps for Trump’s “big beautiful bill.” (PoliticoPro, April 23)

Tax Policy

  • Tax legislation will be a cornerstone of the reconciliation package as lawmakers prepare to extend the major tax provisions from the Tax Cuts and Jobs Act (TCJA) that are scheduled to expire at the end of 2025. (PoliticoPro, April 14)
  • The House Ways and Means Committee is eyeing a potential two-day markup session on May 12 and 13. (PoliticoPro, April 24)
  • House GOP leaders, including Ways and Means Committee Chair Jason Smith (R-MO), are scheduled to meet Wednesday with blue-state Republicans to discuss the personal SALT deduction cap.
  • The meeting marks a key moment in resolving one of the most politically sensitive issues in the tax bill. While most Republicans support maintaining the current $10,000 cap, several GOP lawmakers from high-tax states have threatened to oppose the package unless the cap is raised to at least $25,000. (Punchbowl News, April 25)
  • As policymakers prepare the first major tax bill since 2017, The Roundtable (RER) and the real estate industry are focusing heavily on preserving the full deductibility of business-related property taxes. The deductibility of business-related state and local income and property taxes has emerged as a central issue as lawmakers look for ways to pay for new tax provisions.
  • A cap on the deductibility of property taxes paid by U.S. businesses could have devastating consequences for commercial real estate owners, developers, and investors nationwide, reversing the benefits of the 2017 tax bill and raising effective tax rates on real estate to 1970s-era levels near 50%.  (RW, April 11) 
  • State and local property taxes represent 40% of the operating costs of U.S. commercial real estate, a greater expense than utilities, maintenance, and insurance costs combined.  RER urges its members to weigh in with Members of Congress against restrictions on deducting state and local property taxes.
  • Other important issues for real estate in the current tax discussions include: tax parity for pass-through businesses, potential tax increases on carried interest, preservation of the opportunity zone tax incentives, and a possible expansion of the low-income housing tax credit.  (Bloomberg, April 21)

Potential Challenges Ahead

  • The reconciliation effort faces serious political hurdles, particularly regarding spending cuts and revenue-raising provisions.
  • House Republicans have a narrow majority, and leadership must secure support from nearly every member of their caucus. Proposed cuts to Medicaid and SNAP could generate pushback from moderate Republicans, while debates over “payfors” continue to divide lawmakers.
  • The House and Senate are also operating under different reconciliation instructions, which could further complicate aligning final legislation.

IRA & Energy Tax Credits

  • Since budget negotiations began, Republican leadership has suggested repealing some or all of the Inflation Reduction Act’s (IRA) clean energy tax credits as a way to reduce federal spending. However, several GOP lawmakers have advocated preserving specific provisions that benefit their constituents. (Reuters, April 21)
  • In a recent letter to Leader Thune, four Senate Republicans urged a more selective approach to scaling back the IRA’s tax provisions. Additionally, 21 House Republicans expressed their support for maintaining energy incentives that benefit both traditional and renewable energy sectors in a March letter to House Ways and Means Chair Jason Smith (R-MO). (Newsweek, April 21)

RER at the Forefront

  • This week, RER President and CEO Jeffrey DeBoer appeared on the special webcast  “Real Recession Risk or Temporary Distraction?” hosted by Marcus & Millichap President and CEO Hessam Nadji. DeBoer joined Moody’s Analytics Chief Economist Mark Zandi to discuss recession risks, inflation, and the broader impact of trade and tax policy in Washington. (Watch)
  • DeBoer was also a keynote speaker at the University of Wisconsin-Madison’s James A. Graaskamp Center Spring Board Conference earlier this month, where he shared his insights on how the Trump administration’s economic agenda, regulatory changes, tariffs, and tax policy are impacting commercial real estate.

RER will continue to monitor developments closely as Congress advances a package that could have far-reaching implications for commercial real estate, business taxation, and economic growth.

New Report: Carried Interest Tax Hike Threatens Jobs, Innovation, and Housing

Posted on by abigail_grenadier

A new report released this month warns that proposed tax increases on carried interest could significantly harm the U.S. economy, increase the federal deficit, and jeopardize millions of jobs.

Report Findings

  • “This report is a testament to the importance of backing up policy recommendations with sound calculations and analysis before making decisions that would affect so many American workers, small businesses, and industries,” said Dr. Swenson. (One-Pager)
  • The report warns that increasing taxes on carried interest would result in:
  • Higher Federal Deficit: Raising taxes on carried interest could cost the U.S. government up to $70 billion in lost revenue over the next decade.
  • Job Losses: Real estate, venture capital and private equity partnerships support an estimated 32 million American jobs. The private sector could lose an estimated 1.23 million jobs as businesses lose access to a critical tool for attracting capital and securing investment.
  • Global Competitive Disadvantage: The proposed tax increase would raise the U.S. tax rate on many businesses and investments to 40.8% – higher than China, Canada, and numerous European countries, discouraging foreign and domestic investment.
  • Worsening Housing Crisis: Higher taxes could exacerbate the current housing shortage, stalling construction at a critical time when the U.S. needs 5.5 million new units to meet demand.
  • Declining Innovation: Removing the tax incentive alignment between entrepreneurs and investors would shift investments away from high-risk opportunities, particularly in high-tech and biotechnology industries.
  • Lost Retirement Earnings: Public pension funds supporting over 34 million workers could lose up to $520 million annually as they’re forced into lower-yielding investments.

Industry Response

  • Industry leaders reiterated the report’s findings and warned of the harmful economic consequences of increasing taxes on productive, job-supporting investment. (Press Release, April 8)
  • Since carried interest and its tax treatment first emerged as a controversial political issue in 2007, RER has consistently opposed legislative proposals to tax all carried interest at ordinary income rates. (Axios, March 24 | NYT, March 8)
  • President Trump revived calls to close the “carried interest tax deduction loophole” earlier this year during meetings with Republican lawmakers, framing it as a potential revenue offset. While he hasn’t mentioned it publicly in recent weeks, the issue remains part of broader GOP tax discussions. (Politico, April 25)
  • In March, a coalition of 17 national real estate organizations wrote to congressional leadership urging preservation of current law on carried interest, highlighting that taxing all carried interest as ordinary income would raise taxes on 2.2 million real estate partnerships and nearly 9.7 million partners, potentially stalling new housing, infrastructure, and redevelopment projects. (RW, March 28)
  • Jeffrey DeBoer, President and CEO of RER: “The new study by Professor Swenson is further evidence that recharacterizing this long term ‘carried interest’ capital gain as ordinary income would penalize entrepreneurs, slow housing production, and reduce investment in long-neglected neighborhoods. Construction costs and the risks of real estate development continue to rise and financing remains challenging.  Now is not the time to raise taxes on U.S. real estate,” DeBoer said. (Press Release, April 8)

With the House having approved a $5.3 trillion budget resolution, tax legislation is now on the horizon. This timely study provides critical data on the potential consequences of changing carried interest tax treatment.

Real Estate Industry Urges Congress to Preserve Carried Interest

Posted on by Trey Jackson

As tax negotiations continue this week on Capitol Hill, a coalition of 17 national real estate organizations submitted a unified message to congressional leadership urging preservation of current law on carried interest. (Letter)

Why It Matters

  • The coalition letter, led by the National Multifamily Housing Council and joined by The Real Estate Roundtable (RER) and others, highlighted that taxing all carried interest as ordinary income would raise taxes on 2.2 million real estate partnerships and nearly 9.7 million partners, potentially stalling new housing, infrastructure, and redevelopment projects.
  • Since carried interest and its tax treatment first emerged as a controversial political issue in 2007, RER has consistently opposed legislative proposals to tax all carried interest at ordinary income rates. (Axios, March 24 | NYT, March 8)
  • Research cited in the letter demonstrates that carried interest legislation would lower wages, reduce property values, and undermine economic growth. (Letter)

What’s At Stake

  • “Taxing carried interest at ordinary income rates would discourage the risk taking that drives job creation and economic growth. It would reduce economic mobility by increasing the tax burden on cash-poor entrepreneurs who want to retain an ownership interest in their business. It would have profound unintended consequences for housing affordability and main streets all across our country,” said Jeffrey DeBoer, President and CEO of The Real Estate Roundtable. Roundtable Weekly, Feb. 21)
  • The coalition emphasized that changing the tax treatment would particularly impact small and mid-sized real estate entrepreneurs who contribute sweat equity rather than large capital contributions to their projects.
  • The letter notes that the tax code ”has never, and should never, limit the reward for risk-taking to taxpayers who have cash to invest.”
  • Retroactive application of new tax policies on longstanding partnership agreements could harm small businesses, stifle entrepreneurs and sweat equity, and threaten future improvements and infrastructure in neglected areas.
  • Under the headline “Carried Interest Fight Gets Real,” media outlet Politico wrote that the real estate industry was “laying down a marker as lawmakers begin working to pass a deficit-conscious extension of the 2017 tax cuts.” (Politico, March 27)
  • The signatories of the letter included: National Multifamily Housing Council; American Hotel and Lodging Association; American Resort Development Association; American Seniors Housing Association; CCIM Institute; Council for Affordable and Rural Housing; ICSC Institute of Real Estate Management; Latino Hotel Association; Manufactured Housing Institute; Mortgage Bankers Association; NAIOP, the Commercial Real Estate Development Association; National Apartment Association; National Association of Black Hotel Owners, Operators, and Developers; National Association of Home Builders; NATIONAL ASSOCIATION OF REALTORS®

RER urges lawmakers to retain current law and avoid policies that would disincentivize investment, threaten housing affordability, and penalize job-creating entrepreneurs.

Real Estate Challenges: Business SALT, Carried Interest Emerge as Focal Points of Tax and Budget Discussions

Posted on by Trey Jackson

As congressional Republicans weigh their budget options and consider competing plans from both the House and Senate, their search for revenue offsets has included proposals to restrict the deduction for state and local taxes (SALT) on businesses and raise the tax rate on carried interest. 

Business SALT

  • Prior to the markup of its budget resolution, the House Budget Committee floated a menu of potential revenue offsets for reconciliation legislation, including a proposal to “eliminate the business SALT deduction.” (New York Times, Jan. 28)

  • Depending on how broadly the business SALT limitation is designed, it could include repealing the deductibility of state and local property taxes paid by commercial real estate owners.  Hill discussions on business SALT have intensified in recent weeks.  (Bloomberg, Feb. 18)
     
  • “Eliminating the business deduction for property taxes would be the equivalent of raising business owners’ property tax bills by roughly 40 percent.  Employers would owe federal tax on money that they do not have.  It would lead to insolvencies and foreclosures. It would cause self-inflicted injury to the U.S. economy, including unnecessary job losses, higher rents for families and individuals, and other inflationary pressures.  It is a recipe for a recession,” said Jeffrey DeBoer, President and CEO of The Real Estate Roundtable.

  • The idea of limiting business SALT has support from several outside organizations and, according to Politico, was initially floated by members of the House Freedom Caucus.  (Politico, Jan. 15)

  • “Business taxes are fundamentally different from state and local individual income taxes.  State and local business taxes are an unavoidable expense, an inescapable cost of doing business,” noted DeBoer. “Property taxes alone are, on average, 40% of operating costs for real estate businesses.  In many cases, capping the deductibility of property taxes would require businesses to pay income tax when their actual income and cash flow is negative.”

  • The Roundtable is working, alongside its real estate trade association partners, to raise awareness among policymakers of the risk and harm that a cap on business SALT poses for the industry and the broader economy.  

Carried Interest

  • President Trump’s recent call on Congress to close the “carried interest tax deduction loophole” has put a national spotlight back on the issue of carried interest and its proper tax treatment.  (Financial Times, Feb. 6)  

  • Trump’s expression of support for raising taxes on carried interest led Senators Tammy Baldwin (D-WI), Elizabeth Warren (D-MA), Bernie Sanders (I-VT) and others to reintroduce legislation, the Carried Interest Fairness Act. The bill would recharacterize all carried interest as ordinary income. (Politico, Feb. 18)

  • Sen. Baldwin filed a nonbinding amendment on carried interest during the Senate budget resolution debate this week but did not offer it for a formal vote.  

  • Carried interest emerged as a political issue in 2007, but remains largely misunderstood to this day. In real estate, carried interest is not compensation for services. General partners receive fees, taxed at ordinary rates, for routine services like leasing and property management. Carried interest is granted for the value the general partner adds, such as business acumen, experience, and relationships. It is also recognition for the risks the general partner takes.   

  • In response to the new legislation, the Americans for Tax Reform—alongside a broad coalition of other taxpayer advocacy groups—penned a comment letter urging lawmakers to consider the negative ramifications of this policy.

  • In the letter, the organizations argue that the proposal would discourage investment and reduce growth, urging Congress to oppose the bill. “The current tax treatment of carried interest is an intentional, pro-growth feature of the tax code for more than 100 years that incentivizes risk-taking and entrepreneurship, benefiting investors, public pension funds and retirees.” (Americans for Tax Reform, Feb. 19)

  • The Tax Cuts and Jobs Act of 2017 extended the holding period required for carried interest income to qualify for long-term capital gains treatment from one year to three years.

  • The false narrative surrounding the carried interest issue is that it targets only a handful of hedge fund billionaires and Wall Street executives. The carried interest legislation is far broader and would apply to real estate partnerships of all sizes.

  • “Taxing carried interest at ordinary income rates would discourage the risk taking that drives job creation and economic growth. It would reduce economic mobility by increasing the tax burden on cash-poor entrepreneurs who want to retain an ownership interest in their business. It would have profound unintended consequences for housing affordability and main streets all across our country,” said DeBoer.

Looking Ahead

As tax negotiations develop, RER will continue to engage with congressional leaders on both sides of the aisle to inform policymakers about the real-world consequences of proposed changes to the deductibility of business SALT and tax treatment of carried interest.  

While the budget debate will move forward, it will likely be several weeks, if not months, before the tax-writing committees mark-up and vote on the actual details of their tax and revenue legislation.

Senate Democrats Reintroduce Legislation to Tax Carried Interest at Ordinary Income Rates

Posted on by Trey Jackson

A group of Senate Democrats introduced legislation this week that would tax carried interest capital gains income at ordinary income tax rates of up to 40.8%. (Bloomberg Tax April 16)

Carried Interest Proposals

  • The Carried Interest Fairness Act was introduced on April 15 by Senate Banking Committee Chairman Sherrod Brown (D-OH) along with Sens. Tammy Baldwin (D-WI), Joe Manchin (WV), and several other Democratic co-sponsors.
  • According to Sen. Brown, the change would raise $6.5 billion in revenue over 10 years. The Senators introduced a similar bill in 2021. (Sen. Brown news release; Crain Currency, April 16)
  • This week’s carried interest bill is part of a broader effort by congressional Democrats to position legislative changes in anticipation of the expiration of 2017 Tax Cuts and Jobs Act provisions at the end of 2025. The approaching expiration of those individual provisionsis likely to drive tax negotiations next year into what some policymakers have referred to as the “Super Bowl of Tax.” (Bloomberg Tax, Jan. 4 and Axios, Feb. 16)

Democratic Proposals

FY2025 proposed Biden administration budget
  • President Biden’s 2025 budget also proposes taxing all carried interest as ordinary income. Most of the Biden tax agenda is carried over from his prior budgets. (Roundtable Weekly, March 15 and March 8 | White House Fact Sheet, March 11)
  • Senate Finance Chair Ron Wyden (D-OR) introduced legislation last year to treat the grant of carried interest as deemed compensation in the form of an interest-free loan from the limited partners to the general partner (GP). (Bloomberg Tax, Nov. 15, 2023)
  • The Roundtable has consistently opposed these and similar proposals since 2007 for failing to recognize that carried interest is actually granted for the value a General Partner adds beyond routine services, such as business acumen, experience, and relationships.  Carried interest also reflects a recognition of the risks the GP takes with respect to the partnership’s liabilities—e.g., funding predevelopment costs, guaranteeing construction budgets, and potential litigation.
  • Carried interest changes would also harm small businesses, stifle entrepreneurs and sweat equity, and threaten future improvements and infrastructure in neglected areas. They would increase the cost of building or improving infrastructure, workforce housing, and other socially desirable projects.

The Tax Cuts and Jobs Act of 2017 created a three-year holding period requirement for carried interest to qualify for the reduced 20% long-term capital gains rate.

#  #  #

Proposed Carried Interest Provisions, Opposed by Real Estate Industry, Cut From Reconciliation Bill

Posted on by Trey Jackson

Senator Kyrsten Sinema (D-AZ) at RER's 2022 Spring MeetingProposed changes to the taxation of carried interest were cut from Senate Democrats’ broad Inflation Reduction Act (IRA) yesterday at the request of centrist Sen. Kyrsten Sinema (D-AZ). The Roundtable and 14 other national real estate organizations wrote to all members of Congress on Aug. 3 in strong opposition to the measure. (Coalition letter, Aug. 3 | Wall Street Journal, Aug. 4 |Tax Notes, Aug. 5). Photo above: Sen. Sinema at The Roundtable’s 2022 Spring Meeting.

Vote on Revised Reconciliation Bill 

  • Sinema announced her decision in a statement released Thursday night, commenting she would “move forward” with the $790 billion reconciliation bill after removal of the carried interest provision—subject to the Senate Parliamentarian’s review of the revised bill.
  • Yesterday, Senate Majority Leader Chuck Schumer (D-NY) announced that the chamber will begin consideration of the bill on Aug. 6, setting up a weekend process of around-the-clock votes on hundreds of amendments to the bill.
  • Real Estate Roundtable President and CEO Jeffrey DeBoer commented today, “The wide-ranging climate measures in the revised bill include the most extensive clean energy investments ever considered by Congress—a positive step welcomed by the real estate industry. We are also pleased to see that carried interest provisions in the original version of the Inflation Reduction Act are out, since they would have clearly harmed the residential and commercial real estate industries, job creation and the economy.” 

Real Estate’s Carried Interest Opposition 

Construction mixed use real estate

  • The real estate coalition urged policymakers to preserve current carried interest law and detailed major concerns with the proposed changes to carried interest that were in the original IRA, brokered last week between Sens. Schumer and Joe Manchin (D-WV). (Coalition letter, Aug. 3 and Roundtable Weekly, July 29)
  • The Aug. 3 coalition letter noted, “The carried interest proposal would slow housing production, discourage the capital needed to reimagine buildings to meet post-pandemic business needs, hamper job creation and create an additional unknown in an already confusing economic environment.”
  • The real estate coalition letter concluded, “Now is not the time to impose a tax increase on the countless Americans who use partnerships to develop, own, and operate housing and other commercial real estate. We urge you to preserve current tax law as it relates to carried interest.” 

Senate Considers Changes 

Capitol 3 flags flying

  • Senate Democrats are making additional changes to the package, including adjusting the minimum tax on corporations and adding a 1% excise tax on stock buybacks. (New York Times, Aug. 4 and Punchbowl News, Aug. 5)
  • Before a final Senate vote can be held, the Senate Parliamentarian must ensure the bill complies with special budget reconciliation rules, which require provisions directly relate to spending and revenue—not policy.
  • One hurdle before the Parliamentarian is a clean energy tax credit that proposes a bonus incentive to developers who pay prevailing wages on certain projects. If it is determined to be a policy change, it will be dropped from the bill. (POLITICO Power Switch, Aug. 3)
  • A number of the IRA’s proposed revisions to the federal tax code could leverage greater private sector investments in clean energy building technologies, including:
    • A deduction to help make commercial and multifamily buildings more energy efficient (Section 179D),

    • A credit to encourage investments in renewable energy generation and other low carbon equipment such as solar panels, energy storage, and combined heat and power systems (Section 48), and

    • A credit to incentivize installations of EV charging stations (Section 30C). 

The Roundtable continues to work with its policy advisory committees and national real estate organization partners to assess how details in the bill language could impact CRE. These policies will be a focus of discussion during The Roundtable’s Sept. 20-21 Fall Meeting in Washington, DC. 

#  #  #